Gold sale not a priority: Cyprus finance minister

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Published April 23, 2013

| Reuters

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NICOSIA – Cyprus is not giving priority to a sale of gold reserves under the international bailout agreed this month and is still exploring all options to meet its side of the deal, Finance Minister Harris Georgiades said in an interview.

Georgiades also said he anticipated currency controls, imposed after a chaotic bailout last month and which led to a lockdown of the banking system for 15 days would be eased in "days or weeks".

Cyprus' agreement to sell 400 million euros worth of its gold reserves was one of several shockwaves its progress towards a bailout sent through European financial markets earlier this month.

The amount is small but the precedent of a euro zone central bank being pushed to dispose of some of its reserves helped drive the biggest fall in gold prices in 30 years. Investors worry central banks in some of the euro zone's struggling larger economies could eventually be pushed to follow Cyprus' example.

But while Georgiades said the gold sale was one of several commitments to the island's international lenders, he said it was not an issue which took priority.

"We shall do whatever it takes, we shall meet all fiscal targets. I am sure we shall succeed in gathering the amounts which remain our responsibility in order to avoid any need to come back with a new (adjustment) program," Georgiades told Reuters in an interview on Monday night.

Repeatedly declining to speculate on the timing of any disposal, he said the gold sale was "not even the most important, or the issue of the greatest magnitude" in the bailout deal, worth a total 23 billion euros.

"It is something on the agenda, but it is not something we are tackling now," he said.

Asked whether Cyprus could reconsider the sale if it managed to find the amount elsewhere, Georgiades said:

"So long as we are able to meet the financial element of our commitments I think all possibilities should be explored and they will be explored.

"The same applies not only for that particular issue but the whole framework of our commitments. What I feel it is necessary to repeat is our commitment for fulfilling everything without hesitation."

FRACTIOUS PARLIAMENT

Teetering on the edge of default, Cyprus last month wound down its second largest bank and raided depositors' uninsured savings at another bank to fund a recapitalization. Both banks were badly hit by their exposure to Greece.

It has to come up with most of the 23 billion itself, with only 10 billion made available by lenders and a fractious parliament, which had rejected milder terms of a broad-based bail-in on bank depositors in March, will have to approve the bailout in coming days.

"I think parliament will acknowledge there is no alternative at this point," Georgiades said, adding that most bailout terms, such as increasing corporate tax, spending cuts and tax increases, had already been approved virtually unanimously by lawmakers in by-laws.

Cyprus imposed capital controls at the end of March, worried about a flight of funds from a banking system flush with cash from Russian and European businesses, but also from many overseas Cypriots.

Now islanders are on a cash withdrawal limit of 300 euros a day and have a 2,000 euro ceiling on what they can take abroad, while businesses cannot make transfers exceeding 20,000 euros overseas unless they are vetted by the central bank.

Firms have complained the restrictions are stifling, while Russia has warned it will only restructure its own loan to the island if its interests here are protected.

Cyprus received a 2.5 billion euro five-year loan from Russia in late 2011. Russia had previously said it was ready to restructure the terms by extending the credit and cutting interest to 2.5 percent from an earlier 4.5 percent.

"I am pretty confident these necessary but temporary measures will not be needed in the next days or weeks," Georgiades said.

Asked whether measures would be eased in two, or six months, Georgiades said: "Definitely not six months. I am optimistic we shall be able to proceed much sooner."